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Terrorism May Force Supply Chain Changes

The Sept.11 terrorist attacks have led to increased security on U.S. borders and in the air that may cause long-lasting changes in how the technology and automotive sectors manage their supply chains. The value to I-managers of Internet-based supply chain

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The Sept.11 terrorist attacks have led to increased security on U.S. borders and in the air that may cause long-lasting changes in how the technology and automotive sectors manage their supply chains. The value to I-managers of Internet-based supply chain management systems could become greater than ever as a result.

The temporary closure of domestic airports, seaports and borders after the attacks in New York and Washington, D.C., caused parts shortages in plants worldwide. Electronics manufacturer Solectron was forced to charter a jet to fly critical parts from California to a facility in Ireland. Workers at six Ford Motor plants were idled due to parts shortages and slack consumer demand.

Analysts and economists are predicting the overall economy could become less productive if companies are forced to maintain larger inventories to avoid future disruptions. That could mean higher costs because companies would be less able to capitalize on the efficiencies of just-in-time inventory management and manufacturing. However, Web-based supply chain systems may help offset higher costs by letting companies better manage their inventories.

"This thing will affect the whole supply chain regardless of the sector," predicted W. Guy Fox, chairman of Global Transportation Services and president of the Los Angeles Air Cargo Association.

Further reading

Fox said dozens of air freight shipments from Asia to the U.S. have been delayed. And while most of the backlog will soon be cleared, he expected prices for air freight to rise.

The cost and availability of air freight will be a major concern for companies that rely on airplanes to move their goods between the U.S. and plants in Asia. After the terrorist attacks, the Federal Aviation Administration prohibited passenger planes from carrying cargo. And although the ban has since been lifted, companies such as chipmaker Advanced Micro Devices are still "trying to assess things," said spokesman Drew Prairie.

Although General Motors lost about 10,000 units of production due to the parts disruption, company spokesman David Barnas said GM wont be increasing inventory levels beyond its current two-hour to six-hour supply. "If theres a long-term increase in the time it takes to move a part, we can build it into our distribution schedule, which would eliminate the need for higher inventory levels."

But David Cole, director of the Center for Automotive Research, a nonprofit think tank in Ann Arbor, Mich., said the automakers response could turn out to be wrongheaded. "Just-in-time is their core manufacturing philosophy and they dont want to change that. But they may have to because of the circumstances," he said.

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